Census Data And Tyler Cowen’s Average Is Over

The second major release of 2013 census information happened last week. The 2013 regional census summary tables with household income information were updated, and a very rich set of data is able to be discussed.

Household income data is important in any discussion around inequality because we can use it to look at how the New Zealand population is moving to not only where the jobs are, but where they can afford to live the lifestyle they want.

A common refrain is that housing is too expensive in central Auckland, Wellington and Christchurch. With respect to median household incomes in these areas, that’s quite true. But since the 2006 census the median household income in Auckland has grown from $63,400 to $76,500; in Wellington City from $74,200 to $91,100 and in Christchurch from $48,200 to $65,300.

Percentage increases of 20%, 22% and 35% respectively lead to an obvious question that has to be asked – if Auckland has had the lower growth in median household income, why has it had the highest growth in median house prices?

But wait, the Auckland region is an aggregation of all of the different areas of Auckland. We have to look at local board areas to get a better idea. Taking higher income areas – Devonport/Takapuna where median income has grown from $68,800 to $85,800 (24%) and the Orakei local board area where median income has grown from $88,700 to $107,900 (22%) – there’s a big story inside relative income gains between different suburbs linking to relative changes in house prices.

How do I link this back to what Tyler Cowen was discussing in Average Is Over? Well, in order to live in central cities where higher salaries are on offer, the entry price point will rise relative to other areas over time as the economy moves closer towards higher levels of capital utilisation in service industry business processes.

More people will have to sell out of expensive central city areas and buy in cheaper areas in order to survive after retirement or any change in their ability to earn labour market income.

During this process, capital losses in suburbs that aren’t close to “good schools” and job opportunities are a distinct possibility. Perhaps many people who think they’ve gotten “bargains” will find that higher interest rates and capital losses in the medium term are not as pleasant as being able to say that they’re on the “property ladder”.

One thing that the income inequality crowd haven’t wrapped their heads around is that as Auckland becomes larger and more integrated into Asia Pacific conglomerates corporate structures, significantly higher income inequality is essentially a given. Hardly anyone is making the connection between technology driven job polarisation and the risks to non-superlative suburbs in terms of capital loss.